Raymond James US South Homebuilding & Wood Conference Presentation September 29, 2015
Notices Forward-Looking Statements & Non-IFRS Financial Information • All financial references are expressed in US$ unless otherwise noted. • This presentation contains forward-looking statements and estimates. • Actual company results could differ materially from a conclusion, forecast or projection in the forward-looking information. • Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. • Additional information can be found in the Company’s annual information form, annual MD&A, and on Norbord’s website (www.norbord.com) about the material factors that could cause actual results to differ materially from the conclusion, forecast or projection in the forward-looking information, and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. • During the course of this presentation, certain non-IFRS financial information will be presented. Definitions and reconciliation of terms can be found in the Company’s annual and quarterly MD&A. 2
Company Overview
Company Overview Norbord Snapshot North America • Leading manufacturer of wood-based panel products • Largest global producer of Oriented Strand Board (OSB) – Installed OSB capacity of 8.0 Bsf-3/8” (1) (2) – Installed panel capacity (including particleboard & MDF) of 8.9 Bsf-3/8” (1) (2) – Approximately 2,600 employees at 17 plants across the US, Canada and Europe • Listed on the TSX (“NBD”) • Report in US dollars and in accordance with IFRS • LTM Q2-2015 sales of $1.5 billion (2) Panel Capacity by Region Europe Europe 20% US 43% Oriented Strand Board (OSB) 8.9 Particleboard Bsf-3/8” (1)(2) Medium Density Fibreboard (MDF) Furniture Canada 37% (1) Does not include the 600 MMsf-3/8” Grande Prairie, Alberta Line 2 (“GP2”) expansion project 4 (2) Results reflect combined performance following completion of merger with Ainsworth
Company Overview The Leading Global OSB Company Top 10 Global OSB Producers 9.0 8.0 OSB Capacity (Bsf-3/8") 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Norbord Louisiana-Pacific Georgia-Pacific Weyerhaeuser Kronospan Huber Tolko KronoSwiss Egger Martco Enterprise Value $6,000 $5,000 Enterprise Value ($USmm) $4,000 $3,000 $2,000 $1,000 $- West Fraser Canfor Corp. Louisiana-Pacific Norbord Interfor Western Forest Products Conifex 5 Source: Bloomberg and company filings. Enterprise values as at Q2 2015
Company Overview Norbord’s Products • Norbord’s operations now include 15 OSB mills and two other plant locations in the UK producing particleboard, MDF and related value-added products OSB – 90% of Capacity • New home construction • Repair and remodel • Light commercial construction • Industrial applications Particleboard – 6% of Capacity • New home construction • Repair and remodel • Furniture • Fixtures MDF – 4% of Capacity • Furniture • Fixtures • Mill work 6
Industry Overview
Industry Overview Typical Uses for OSB Products • OSB is an innovative, affordable and environmentally “sustainable” structural panel – Serves many of the same uses as plywood, but produced at a lower cost • Norbord expects OSB will continue to capture market share from plywood – Currently, OSB represents 66% of total North American structural panels Roof Window Header Wall Sheathing Garage Webstock Door Header Flooring Door Rimboard Header 8
Industry Overview Global OSB Industry Industry OSB Capacity (MMsf-3/8”) 30 20 10 0 North Europe South Asia America America Norbord operates in the two significant global OSB producing regions 9 Source: Company Documents and Other Public Filings
Industry Overview North American & European OSB Industries North American OSB Industry European OSB Industry Others Kalavela 2% 4% Other Smartply Martco 3% 3% 5% Tolko 26% 8% Sonae 7% Huber Kronospan 8% 39% 11% Industry Capacity Industry Capacity Weyer- 28 Bsf-3/8” 8 Bsf-3/8” haeuser 11% Egger Louisiana-Pacific 12% 22% Georgia-Pacific KronoSwiss 19% 20% Norbord is a significant player in both key markets 10 Source: Company documents and other public filings – installed industry capacity
Industry Overview Demand Growth Ahead in Both Key Markets OSB Share of Structural Panels 75% 50% North America 25% Europe 0% 80 85 90 95 00 05 10 11 Source: FEA and Norbord Estimates
Industry Overview US Housing Recovery is Real US Housing Starts and Underlying Demand 2.5 US Housing Starts (mm) 1.5 mm Over-Built 2.0 3.7 mm Under-Built 1.5 1.0 0.5 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015F U.S. Housing Starts Underlying Demand North American OSB Demand and Capacity 35.0 100% Effective Demand / Capacity 29.2 29.0 28.7 28.6 28.4 28.4 28.0 28.0 27.8 30.0 90% 26.9 27.1 27.1 26.9 Capacity (Bsf-3/8") 25.9 24.8 24.0 22.8 25.0 80% 21.4 20.0 70% 15.0 60% 10.0 50% 5.0 40% – 30% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F Effective Capacity Mothballed Capacity Effective Demand / Capacity Favourable long-term OSB industry fundamentals 12 Source: US Census Bureau and Forest Economic Advisors, LLC (FEA); As of September 2015
Industry Overview North American Capacity Restarted to Meet Growing Demand North American OSB Installed Capacity: 39 Mills in Operation 8 Mills Indefinitely Curtailed 6 Mills (Re)started in 2013 Norbord Mill 13 Source: Company documents and other public filings
Industry Overview Attractive North American OSB Price Outlook • OSB prices are tied to demand for building products, which is influenced by the general economy, demographics and the need for housing • With US housing recovering, OSB prices are projected to rise above trend North Central Benchmark OSB Price $400 Historical Price Forecasted Price $350 Annual Average NC Price $300 US$ per Msf 7/16" 15-year average: $229 $250 $200 $150 $100 $50 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F 14 Source: Random Lengths and Forest Economic Advisors, LLC (FEA); As of September 2015
Industry Overview Core European Housing Markets Recovering Housing Starts European OSB (000’s) Share of Structural Panels 45% 275 40% 250 Germany +4% in 2014 35% 225 30% 200 25% 175 20% UK +9% in 2014 150 15% 125 10% 100 5% 75 0% 50 80 85 90 95 00 05 10 2009 2010 2011 2012 2013 2014 15 Source: National House Builder Confederation (NHBC), Construction Products Association (CPA) & Bundesbank
Industry Overview Japanese Housing Market Stable • Significant growth opportunity – OSB accounts for only ~8% of the structural panel market in Japan compared to >60% in North America Japanese Housing Starts (000’s) 1,285 1,236 Wooden All Other 1,093 1,061 980 892 883 729 693 834 813 788 577 556 430 403 396 369 353 358 556 550 543 517 505 487 489 465 460 430 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 16 Source: Japanese Ministry of Land, Infrastructure, Transport and Tourism
Business Strategy
Business Strategy Norbord’s Strategy is Well Defined Develop a world-class safety culture 1 Pursue growth in OSB 2 Own high-quality assets with low-cost positions 3 Maintain a margin-focused operating culture 4 Focus on growth customers through 5 best-in-class service and product development Allocate capital with discipline 6 18
Business Strategy Norbord’s Growth Focused on OSB Norbord OSB Capacity (Bsf-3/8”) 8 7 6 5 4 3 2 1 0 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 19
Business Strategy Margin Improvement is an Operational Priority • Margin Improvement Program (1) Margin Improvement Program Gains ($ in millions) (MIP) gains help offset impact of “In Control of Our Controllables” industry-wide rising input costs: 56 – Increased productivity – Reduced overhead costs – Reduced raw material usage – Improved product mix 37 • MIP has delivered $261 million of 29 28 margin improvements over the 25 23 24 past 11 years with minimal capital investments 16 14 9 (2) 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (1) Measured relative to prior year at constant prices and exchange rates 20 (2) The benefits of improved productivity and a richer value-added product mix were offset by higher maintenance spending in 2013
Business Strategy Further MIP Ahead Through Identified Merger Synergies $45 Million in Annual Merger Synergies (1) Achievable over 18-24 months Product Ainsworth’s Specialization Forming Technology Sales & Order File Operational Optimization Logistics Standardization Operational Best Practices Corporate Continuous Press Overhead Experience Single Public Purchasing Company Savings (1) Costs to achieve ~50% 21
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